Swiss America Blog Archive

9.9.14 - Gold Presents Major Buying Opportunity!

Gold prices closed lower on expectations that the Fed may tighten monetary policy sooner than expected. U.S. stocks edge lower, S&P suffers steepest one-day decline in five weeks while NASDAQ dropped most since July 31. Gold last traded at $1,248 an ounce. Silver at $18.84 an ounce.

A terrific buying opportunity is emerging in gold right now as its price nears a 3-month low due to recent strength in the US dollar.

There are 3 primary reasons why this is such a good buying opportunity:

1. The recent strength in the dollar is likely to be temporary as there has been nothing in recent monetary and fiscal policy to suggest the dollar's outlook will improve over the longer-term. The US national debt is still over $17 trillion and growing since deficit spending is forecast to continue indefinitely. And the US Federal Reserve is still instituting a loose monetary policy with negative real interest rates. Despite rumors that the Fed will tighten, there is still a debate within the Federal Reserve Open Market Committee on that score and Fed Chair Janet Yellen has expressed concern over recent economic reports, particularly employment reports.

2. The stock market is at record heights unjustified by underlying economic fundamentals. More and more experts are warning that the stock market could pull back at any time--perhaps severely. Because gold has historically had an inverse relationship to stocks, this eventuality will push gold prices higher.

3. September has traditionally been the best seasonal month for the price of gold. The month is still young. History suggests that gold will emerge from September in better shape than it entered September.

An additional factor likely to boost gold: India, one of the world's largest consumers of gold, is entering its festival season, which usually results in increased gold demand.

The bigger economic picture in the US is one which prompt investors to stay on guard. The economy is far from healthy and the American people know it.

Wary Americans remain in a defensive posture when it comes to their pocketbooks, and for good reason. A majority still have some serious financial issues, with only 22 percent confident the economy will improve.

The Federal Reserve's recently published Survey of Consumer Finances confirms that this pessimism is grounded in reality. For 90% of Americans, real incomes have actually fallen over the past three years.

Moreover, average hourly pay has crept up only 2 percent a year on average since the recession officially ended five years ago -- far below the gains in most economic recoveries.

Meanwhile, the economic stagnation does not mean that inflation is non-existent. Quite the contrary, milk prices have hit a record high, a development that will have a ripple effect in other food prices including everything from cheese and butter to pizza and pastries.

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9.4.14 - Experts Preparing For Stock Market Plunge

Gold prices end lower on a stronger U.S. dollar. U.S. stocks fall as investors await jobs report. Gold last traded at $1,259 an ounce. Silver at $18.99 an ounce.

The stock market continues to reach new heights in defiance of economic and financial data alongside warnings from a variety of experts.

World stock bourses are climbing higher today on a surprise move by the European Central Bank (ECB) to cut interest rates from already record low levels. In addition, the ECB said that it would commence open market operations in the form of buying packages of bank loans in an effort to pump liquidity into the European economy.

All of this is well and good until fundamentals and reality catch up with the party.

Not everyone has confidence in the future of the stock market. In particular, some of the financial world's billionaire superstars are pulling out of stocks.

"The stock market is at an all-time, but economic activity is not at an all-time," explains billionaire investor Sam Zell to CNBC, adding that, "every company that's missed has missed on the revenue side, which is a reflection that there's a demand issue; and when you got a demand issue it's hard to imagine the stock market at an all-time high."

Zell also added: "I don't remember any time in my career where there have been as many wildcards floating out there that have the potential to be very significant and alter people's thinking."

Zell's forecast should not be shocking following warnings from fellow billionaire investors George Soros, Stan Druckenmiller, and Carl Icahn that there is trouble ahead.

As gauged by the weekly Investors Intelligence report, bearishness among market newsletter writers has also fallen to 13.3 percent, a level it has not seen since 1987 as the market continues to set new highs despite a seemingly endless call for a long-overdue correction.

The last time investors had this little fear about stocks was 1987, the year of the biggest market crash in history. On the infamous Black Monday, Oct. 19 1987, the Dow Industrial plunged more than 22 percent.

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9.2.14 - Keys News Articles Paint Positive Picture For Gold

Gold prices lower on a stronger U.S. dollar and lower oil prices. U.S. stocks end lower despite data showing U.S. manufacturing expanded at the fastest pace in three years. Gold last traded at $1,266 an ounce. Silver at $19.11 an ounce.

On the first US trading day of September there are several key news articles painting a positive picture for gold. September is traditionally a positive month for gold.

The biggest news has actually garnered very little attention--but it should!

As we have mentioned frequently in recent months, Russia, along with China, has been moving to displace the US dollar as the world's primary medium of exchange. Those efforts appear to be seriously escalating.

There are reports that Saudi Arabia--OPEC's largest oil exporter--is close to allowing the sale of oil and natural gas to be done in both Roubles and Yuan, bypassing the US dollar.

This has serious negative implications for the value of the dollar, which should result in an increase in the price of gold in dollar terms.

Meanwhile, there are signs that Indian gold demand is continuing its rebound over 2013 levels. The United Arab Emirates (specifically Dubai), which has historically been the primary trading post between East and West, reports that total gold demand in the UAE reached 25.4 tons in the first quarter of 2014. The 16% increase from Q1 in 2013, was largely driven by Indian tourists choosing to buy gold in the UAE. That is very bullish news since India has historically been the largest importer of gold in the world, only having been surpassed by China last year.

Gold demand is surging in China as well. The value of precious metals held by China’s largest lenders has surged 66% from a year ago as banks lease more gold. The lenders’ holdings were the equivalent of about 1,445 metric tons of gold, based on June 30 prices, up 55 percent from the year before. That’s more than the 1,054 tons that China’s central bank has in reserves, according to World Gold Council data.

Global economic news also seems supportive of higher gold prices going forward due to economic uncertainty.

There has been a sudden, and quite dramatic, collapse in global manufacturing as tracked by various Purchasing Managers Indices.

Out of the 26 countries that have reported so far, nine reported improvements in their manufacturing sectors in August, while 15 recorded a weakening, and two remained unchanged.

The biggest concern: virtually every core and peripheral Eurozone country of note (from France and Germany to Spain and Italy) saw substantial contraction.

Finally, as we mentioned above, September has traditionally been a positive month for gold. The same cannot be said for stocks. With the stock market already being overdue for a pullback, this should be a concern for investors.

Stocks have, on average, swooned in September, wiping out gains in the last 20, 50 and 100 years. Will history repeat itself this September?

Big institutional investors such as Blackstone and Wells Capital Management have raised concerns that this summer rally could grind to a halt.

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